Though down almost 0.4% today, the iShares MSCI Emerging Markets exchange traded fund (EEM) ended the week in the green, rising more than 1.7% to continue a rally of more than 22% from a five-year low reached in January.

Here’s around up of headlines from Alibaba (BABA), Russia, Latin America and elsewhere. Read More »

The sharp political rhetoric coming out of the Kremlin regarding Ukraine has heightened fears about military action by Russia in Crimea. But Teneo Intelligence’s Otilia Dhand says the real threat is against the Donbas region in eastern Ukraine. Read More>>

Not necessarily, says Eurasia Group’s Cliff Kupchan and Andrew Bishop. They warn that the near-term fallout from the revelations, already on display in the form of global outcry, will be a real issue for governments that are struggling to command the respect and trust of the people, given that the scandal further highlights the gap between the haves and the have-nots, even in the cases where the actions may ultimately be determined to be legal. However, it may not be as wide-ranging and some reformers would like.

Turkcell’s net income for the quarter was at TRY 630 million ($216.9 million) and pro forma net income excluding non-recurring items rose by 17.8% year-on-year to TRY 707 million. The company cited a decrease in net income due to lower interest income; it also cited currency weakness, with most of its capital spending in foreign currency. Voice revenue slowed due to the company’s “focus on restoring inflationary pricing in the market.”

Turkcell Turkey accounts for 91% of revenue, which was TRY 3.4 billion, up 6.4%, in the quarter. The company has been consolidating debt in Belarus and Ukraine to reduce foreign currency risk at subsidiaries; it also does business in Germany and the portion of the Island of Cyprus that Turkey administers. Turkcell raised roughly $2.9 billion through the sale of bonds in the quarter, including a $500 million euro-bond sale that was nearly four times over-subscribed, according to a transcript of the company’s quarterly conference call, quoting CFO Murat Erden.

CEO Caan Terzioglu added that Turkcell is well positioned to provide additional services to customers as it adds spectrum and bandwidth. From the transcript:

“We secured the spectrum for the next 13 years, and just like we have been the leader in 2G and subsequently in 3G, 4G will be in the same track. We have acquired 47% of the total spectrum auctioned by the Turkish government … at 47% of the total tender value. So I think this will be an important sustainable competitive advantage for us for the next 13 years …”

“The country [Ukraine] is essentially bankrupt and without serious amounts of aid will default. In August, Ukraine reached a deal with its private creditors on $19 billion of commercial debt which reduced yields, extended maturities, and reduced the face value of the bonds by 20% – all of which reduced the country’s financing needs over the next four years to a more manageable $15 billion. In addition Russia has a $3 billion official loan outstanding, which is due for repayment by the end of the year; and Ukraine had hoped that Russia would join the negotiations – no such luck. President Vladimir Putin is insisting on payment in full; and if he doesn’t get it, it will mean that the International Monetary Fund will be legally unable to extend its planned $17.5 billion loan – which is where the political dimension comes into play …

Russia wants to keep Kiev guessing, unsure of how the situation in the East of the country will develop. There remain misunderstandings on both sides about the requirements of the two Minsk Agreements. … Russia wants to pressure Kiev into introducing the constitutional changes demanded by the second agreement. These require Kiev to establish quasi-autonomous regions in the East which would remain part of Ukraine and be subject to the Kiev government, but have a veto over certain areas of government policy – notably over foreign and defence policy …

President Putin’s overall strategic aim – globally – is to re-establish the perception of Russian power and influence throughout the world; and ensuring that no settlement in the Middle East can now be brokered without his involvement, and that Ukraine remains within the Russian orbit go a long way to achieving this objective. Thus his actions in both Syria and Ukraine are designed to increase his leverage with the West; if the West wants a settlement in the country, it will have to accommodate in some shape or form, and for some time, the involvement of President Bashar al-Assad; if the West wants to get the IMF loan into Ukraine, it will have to pressure Kiev into implementing the Minsk 2 constitutional settlement …”

Some headlines after a mostly good day in emerging markets, with the iShares MSCI Emerging Markets exchange-traded fund (EEM) down 0.2% and the iShares China Large-Cap ETF (FXI) down 1.5%.

AFP/Getty Images

Goats decorated for the Eid al-Adha festival in Old Delhi, India.

The the International Monetary Fund cut its global growth outlook, citing emerging market slowness and weak commodity prices. The global economy will rise 3.1 percent from a July forecast of 3.3 percent, and next year, growth is now projected to be 3.6 percent, less than the 3.8 percent projected. For the country-by-country growth data, see our post “As IMF Cuts Emerging Market Growth, Russia, Mexico & Gold Rally.”

Greece needs to successfully navigate its first review of the 86 billion-euro ($97 billion) rescue program before the euro area will release funds or ease Greece’s debt burden, Dutch Finance Minister Jeroen Dijsselbloem said, according to Greek newspaper Ekathimerini in English. The Greek government released a budget Monday in which government debt is projected to rise to 198 percent of gross domestic product in 2016, from 187.6 percent, due to new bailout loans. The budget projects a 2.3 percent decline in the Greek economy this year and a 1.3 percent decline next year, according to the New York Times. The Global X FTSE Greece 20 ETF (GREK) rose 2%, and the National Bank of Greece (NBG) was little changed.

Falling oil prices are the driver of Russia’s economic collapse, which has been exacerbated by sanctions due to Russia’s support of rebels in Eastern Ukraine.

Reuters

An underground natural gas storage facility near Striy, Ukraine.

So says John Greenwood, the chief Economist at Invesco, who writes that Russia needs higher oil prices to help stabilize its economy and to diversify away from energy as a revenue source. He adds in a blog post today:

“Against the backdrop of low oil prices, further depreciation of the ruble and economic stagnation, I believe it’s likely that the rate hikes will be reversed as market rates fall with the weakening economy. Inflation peaked in March at 16.4% year-on-year but has since stabilized. However, with the ruble falling again on the back of further weakening of oil prices, I anticipate that inflation will likely remain about 15% until early 2016 and then fall back to about 5% …

The ruble’s collapse last year created much concern that Russian companies wouldn’t be able to repay their $100 billion foreign debt in 2015. However, Russia has been using its large official foreign exchange reserves to help offset the currency crisis. The Central Bank of Russia launched a $50 billion program to lend dollars to companies at a concessionary rate when the ruble collapsed last December. But with the weak outlook for world oil prices, will foreign reserves, although significant, be able to sustain this support policy?

In short, Russia needs a higher oil price to help stabilize its economy in the near term. Over the long term, the country needs to diversify away from energy and restore market forces to the economy rather than relying on political patronage and cronyism.

The Market Vectors Russia exchange-traded fund (RSX) is down 2.2% today. Among individual stocks, oil producer Lukoil (LUKOY) is down fractionally, while gas production and transportation company Gazprom (OGZPY) is down 1.9%. Bank Sberbank (SBRCY) is down 0.8%, telecom VimpelCom (VIP) is down 6.2%. Yandex (YNDX) is down 2.4%.

“We think a potential squeeze on cash by competing high-priority projects and dividends would be a good [thing] for Gazprom’s shareholders, as it might inject some discipline into the company’s investment plans, which often seem profligate.”

The word came down last week: Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing (Rospotrebnadzor) cited safety concerns in soap, cosmetics and other products, according to a Euromonitor blog post. P&G and Henkel control about 40% of the otherwise fragmented Russian home-and-personal care market, and more than half the market share in the categories targeted. Also affected: Werner & Mertz and Russian company Nevskaya Kosmetika. Unilever (UN) appeared unaffected, with a small 2% share of the market, according to Euromonitor.

Western sanctions against Russian companies and individuals have persisted this year; they resulted after Russia’s annexation of Crimea, formerly in Ukraine. Euromonitor researcher Vitalij Vladykin writes:

“In June 2015, Henkel opened one more factory in Russia and announced that it is still interested in investments into local market. If these restrictions from Rospotrebnadzor are indeed connected only to insufficient quality of products, this issue will be quickly solved by manufacturers. However, if this decision has deep political roots, international companies will need to review their business plan for Russia, which will affect not only local consumers, but also thousands of employees. The popular idea of import replacement which is proposed in Russia will be hard to implement in the case of home care. Multinational companies managed to get dominant positions due to strong brand names, which were consistently supported with innovative product launches and wide promotional campaigns.”

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. The Barrons.com Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools.